Recently, the owner of Martha\'s Wares encountered severe legal problems and is
ID: 1143074 • Letter: R
Question
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,130,000 that is currently appraised at $1,330,000. The equipment originally cost $610,000 and is currently valued at $357,000. The inventory is valued on the balance sheet at $300,000 but has a market value of only one-half of that amount. The owner expects to collect 97 percent of the $170,200 in accounts receivable. The firm has $11,800 in cash and owes a total of $1,330,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?
Explanation / Answer
Ans: $683,894
Explanation:
Market value of this firm = $1,330,000 (building) + $357,000 + (0.5 × $300,000) + (0.97 × $170,200) + $11,800 – $1,330,000 (amount owed)
= $1,330,000 + $357,000 + 150,000 + $165,094 + $11,800 – $1,330,000
= $683,894
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